Choosing an accounting method

There are two methods of accounting for GST: a cash basis and a non-cash basis (accruals).

The method you use will affect when you must report GST.

Businesses with an aggregated turnover (your business's turnover and the turnover of closely associated entities) of less than $10 million, or who use cash accounting for income tax, can use either method. Most larger businesses must use the non-cash method.

Sales

You account for the GST payable on the sales you make in the reporting period in which you receive payment for them.

If you receive only part payment for a sale in a reporting period, you only account for the GST in the part of the payment you received.

Purchases

You account for GST credits on your purchases in the reporting period in which payment is made. You must have a tax invoice before you can claim a GST credit, except for purchases costing $82.50 or less.

It is to your advantage to claim your GST credits in the reporting period in which you make the purchases they relate to, but you are not obliged to. You have four years to claim credits.

If you pay only part of the cost of a business purchase in a reporting period, you claim only the GST credit for the part of the cost you paid.

Accounting for GST on a non-cash basis

Most larger businesses must use the non-cash accounting method. Small businesses can choose to use either the cash method or the non-cash method.

Using the non-cash method means you account for GST on the business activity statement that covers the period in which you issued the tax invoice or received any payment (for a sale) or received the invoice from your supplier or made any payment (for a purchase).

Sales

You account for the GST payable on the sales you make in the reporting period in which you issue a tax invoice or receive full or part payment, whichever happens first.

This means that if you receive a payment before issuing the tax invoice, you must include the GST amount in the reporting period in which the payment happened, even if it is not the period you issue the invoice.

Purchases

You must have a tax invoice for a purchase before you can claim a GST credit.

It is to your advantage to claim your GST credits in the reporting period in which you either receive the tax invoice from your supplier or make some payment (whichever comes first) – but you are not obliged to. You have four years to claim credits.

Simplified accounting for food retailers

Small food retailers such as bakeries, milk bars and convenience stores make both taxable and GST-free sales.

If you don't have adequate point-of-sale equipment to account for taxable and GST-free sales, you can report your sales and purchases using the GST simplified accounting methods (SAM) for food retailers. The simplified method uses pre-calculated business norms percentages for different types of food retailers.

There are two methods of accounting for GST: a cash basis and a non-cash basis. Businesses with an aggregated turnover of less than $2 million, or who use cash accounting for income tax, can account for GST on either a cash or non-cash basis. Most larger businesses must use the non-cash method. Small food retailers can use simplified accounting methods specifically for their industry.

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If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.